Edwards’s 2-to-1 Budget Law

From Chris Edwards, the Director of Tax Policy Studies at the Cato Institute:

How should government officials decide on whether to fund big projects such as fighter aircraft, highways, bridges, and other types of infrastructure? First, they should check the Constitution to see whether they are legally allowed to spend on the object in consideration. Second, they should assume that the item will cost at least twice as much as initial estimates indicate.

There should be a 2-to-1 hurdle when the price tag of a project is being considered.
Government purchases of military hardware, highways, energy projects, space equipment, and other items often cost 50% or 100%, or more (see here and here), above what politicians originally promise.

Let’s be conservative and say that a 50% cost overrun is typical, such that we can expect a new $1 billion project to actually cost taxpayers $1.5 billion. But as economists often point out, paying for $1.5 billion in government spending will cost taxpayers much more than $1.5 billion because of the “deadweight losses” or inefficiency costs created by extracting taxes from the private sector with a complex and high-rate system.

How much more? Harvard’s Martin Feldstein thinks deadweight losses might be $1 for each added dollar of taxes. But let’s be conservative and say it’s only 50 cents on the dollar. So government projects impose deadweight losses of 50% on costs that are likely to balloon at least 50%.

The bottom line is that when America’s taxpayers hear that politicians want to spend, say, $10 billion on a new scheme, they should assume that they will face an ultimate financial hit of $22.5 billion. And that’s conservative!"

Hold on to Your Wallet!

UPDATE: Alright, I've had a bit of ice cream to soothe my nerves and refocus my perspective. I thought I would take a moment to mention that I am thankful we have not only one budget proposal (the House) but two, as the Senate just announced their bipartisan budget plan. As much as I might detest both of these measures I just wanted to acknowledge that at least there is a plan. And that ladies and gentlemen, is what you call an attitude adjustment!

A budget solution that robs from cities, counties, almost every designated fund, and still consists of more debt (borrowing) without real reform, without trimming any of the government waste and without addressing the $2.2 BILLION DOLLAR SHORTFALL and then the news that Jerry Weiers stink'n OHV bill passed out of the Senate today...can the day get any worse? Oy vay! What next...the passage of the GOP Economic Stimulus package? Tell me it isn't so!

Super Bowl wasn't a windfall

"Glendale did not recoup what it spent to host Super Bowl XLII, according to a new study that showed out-of-towners here for the game added an estimated $1.2 million to the city's tax coffers.

The city laid out $3.4 million preparing for and hosting the Feb. 3 game.

Bottom line: The city spent $2.2 million more than its estimated take in connection with the game."

Economic stimulus pushed by universities gets support

Please, please read this and weep!

Economic stimulus pushed by universities gets support

"People will wonder how the state can be $1.9 billion in the hole next year and yet approve a plan for $1.4 billion in construction," said House Minority Leader Phil Lopes, D-Tucson.

Things That Make Your Blood Boil...

Read this article about the Peach Springs School District and tell me that your blood doesn't boil first over the mismanagement, then over the fact that this gentleman still has a job.

2007 State Budget Win For AZ Families

GROE NOTE: I do not agree with this perspective from the AZ Department of Commerce, a bloated government agency, but am including this press release to highlight a different perspective.

This week, the legislature passed and Governor Janet Napolitano signed into law Arizona’s budget for fiscal year 2007. It is a win for Arizona families, especially when it comes to jobs.

As you know, the scientific research, technology and innovation are keys to the future of the Arizona economy. This budget includes the $35 million 21st Century Fund, proposed by the Governor in her State of the State as Innovation Arizona. Its goal is to attract world-class researchers, accelerate the state’s technology market and bring innovative products to market. The result will be more high-paying jobs for Arizonans, and that will expand industrial growth and increase Arizona’s prosperity.

The Arizona Department of Commerce looks forward to the strong statewide collaboration in this endeavor. It will certainly move Arizona forward.

Gilbert Jimenez, Director
Arizona Department of Commerce
Our Job is JOBS!